how dreadful has holding a bad credit rating been in your life?

[die_rich88]

hi all,

i am a college student, 21 yrs old, currently residing in Toronto Canada. I do not know what exactly is my credit score, but I know its probably pretty bad. Just to give u an idea, I've missed payments on all kinds of bills (VISA,MC,cell phone,etc etc) I've gotten my phone disconnected once, missed 2-3 months of credit card payments probably on several occasions. I have recieved those collection warning letter /calls maybe a little too many times. I currently owe around 5000 worth of credit card debt.

My bad credit is partly due to bad finacial times and some due to simple forgetfulness ( I am really forgetful ). Howver recently I have commited myself to paying off my bills and everything on time, gets things orgainzed and everything.

My question is, how does one improve his credit rating? Or can one even do so? By that I mean, if I practise and maintain good credit for say a couple of years, does my brief history of bad credit stay with me for life despite like say improvments in terms of ratings?

Also, how much has bad credit affected your life? Does have alot of impact?

Do you guys think I should get help from those debt consolidation people? Or do you think just paying it off by myself is better?

[Los Feliz Slim]

You improve your credit rating by being responsible for years and years. Do not call one of those debt consolidation places unless you cannot pay what you owe and it's only going to get worse.

I was just like you in college, got my [censored] together, and by the time I was 28 or so was able to lease a car, buy a house, etc. Just keep your nose clean from here on out.

[TStoneMBD]

im not sure if this is sound credit building strategy, so someone please correct me if i am wrong, but id recommend the following:

get your hands on whatever credit cards you can. you have to be careful when applying for cards because every time you apply for credit you lower your score. however, get your hands on some credit cards with low balances if you can get accepted for them. $200 max balance is more than suffice. get like 5 of these cards. charge all of your expenses to all 5 cards every month and pay off all 5 cards without letting any of them maintain a balance.

most credit card companies allow you to setup automatic bank payments or will charge a debit card of yours so you dont even have to worry about paperwork or checks. having 5 credit card agencies reporting good credit for you should be able to build up your credit in no time. the key to building good credit is to use as many credit reporting agencies as possible as long as it isnt too much too handle of course.

[Peca277]

Also factored in is how long you've had the accounts open. A lot of accounts open for less than 3 years isn't considered a good thing... but obviously in the long run it would be the way to go. Also, I hear that if you pay off the entire balance every month it doesn't help as much as if you carry over some of it. I always pay mine off, but a few people in this forum mentioned several months ago that you should leave a small balance.

If you really want to improve your credit score you can't just have a quick fix and keep yourself on track for a few months or a year, you need to be on top of this stuff the rest of your life. Good luck my friend.

[pudley4]

[ QUOTE ]
hi all,

i am a college student, 21 yrs old, currently residing in Toronto Canada. I do not know what exactly is my credit score, but I know its probably pretty bad. Just to give u an idea, I've missed payments on all kinds of bills (VISA,MC,cell phone,etc etc) I've gotten my phone disconnected once, missed 2-3 months of credit card payments probably on several occasions. I have recieved those collection warning letter /calls maybe a little too many times. I currently owe around 5000 worth of credit card debt.

My bad credit is partly due to bad finacial times and some due to simple forgetfulness ( I am really forgetful ). Howver recently I have commited myself to paying off my bills and everything on time, gets things orgainzed and everything.

My question is, how does one improve his credit rating? Or can one even do so? By that I mean, if I practise and maintain good credit for say a couple of years, does my brief history of bad credit stay with me for life despite like say improvments in terms of ratings?

Also, how much has bad credit affected your life? Does have alot of impact?

Do you guys think I should get help from those debt consolidation people? Or do you think just paying it off by myself is better?

[/ QUOTE ]

Take care of it yourself. My credit rating went from about 550 to about 725 in 18 months, once I got everything paid off and kept everything current. You're young enough that if you can get this all taken care of soon, you won't feel any lasting effects once you hit your mid-late 20's (when it starts to become really important)

Pay off all your credit card balances, and keep just one card. Use it a lot, and never miss a payment, not even by a day. (I've heard conflicting stories on whether keeping a balance and making payments on time is better than paying off the entire balance every month, so I'm not sure which is actually better.)

[eastbay]

[ QUOTE ]

Also, how much has bad credit affected your life? Does have alot of impact?

Do you guys think I should get help from those debt consolidation people? Or do you think just paying it off by myself is better?

[/ QUOTE ]

Do not use the debt consolidation services. They are arms of the credit card companies and exist simply to prevent you from declaring bankruptcy, which you should not do anyway.

The consequences can be serious. You may have trouble opening a checking account, renting an apartment, obtaining a car loan, and especially a mortgage when the time comes.

More importantly you may have trouble getting hired to many jobs which will do background checks and consider your credit score the most important component of the check.

If you can't get a job, open a checking account, or rent an apartment, you're in a world of hurt. So you need to start fixing things now. My roommate from college ran into all of these things, and it indeed made his life VERY difficult.

Get your credit score online from all three agencies. You can do this for free now in the US. Start getting everything current that you possibly can.

DO NOT MISS PAYMENTS AGAIN, EVER. Don't keep high balances. Don't open new lines of credit. Your score will improve steadily over time as your delinquencies move into the past, and in 7 years you could be perfect again when all currently derogatory information short of bankruptcy will be expunged (and can happen sooner if you're lucky and continue with perfect credit behavior.)

You can really help yourself to do this by using only accounts that offer automatic online payments, and be sure your account covers those expenses every month. And then there's the obvious: don't charge things you couldn't pay cash for. Use credit cards for convenience, not as loans. That's financial suicide.

eastbay

[eastbay]

[ QUOTE ]
Also, I hear that if you pay off the entire balance every month it doesn't help as much as if you carry over some of it.

[/ QUOTE ]

This is false. It's a fun "conspiracy" type story but it simply isn't true.

eastbay

[eastbay]

[ QUOTE ]
(I've heard conflicting stories on whether keeping a balance and making payments on time is better than paying off the entire balance every month, so I'm not sure which is actually better.)

[/ QUOTE ]

Carrying a balance does NOT help your score. This is a common myth.

A lower debt to credit ratio is always better.

eastbay

[Voltron87]

I always assumed this wasn't true because of how flat out counter intuitive it was. people probably buy into it and things like it because the rules for credit scores/ etc are so hard to figure out stuff like that gets believed.

[swolfe]

my credit score last i checked was 755. my girlfriend's is 806. the key to having a high score is to have a deep credit file (accounts going back years), good payment history (no more than a 1 or 2 30 day lates), and low balances in relation to available credit.

the quickest way to increase your score is to pay off any debt you have. if your $5K is spread out over several cards, consolidating them to one will increase your score, but not as much as paying everything off completely. if you've had several late or missed payments, the only thing that will help is making timely payments from now on. it doesn't really take that long for the effect of late payments to diminish. you could see a score increase in as little as six months of good payments.

[OtisTheMarsupial]

OK, first you get your credit report from
annualcreditreport.com (http://www.annualcreditreport.com)
and you look it over for inaccuracies. Dispute the inaccuracies immediately (it takes months sometimes for them to fix things).

Then you call the creditors you have bad accounts with (late payments, in collections...) and you see if you can work out a payment plan. Key issues here - you offer to pay off some or all of the debt, they offer to DELETE the debt. Get the agreement in writting.

They won't negociate? Send certified letters to the reporting agencies (transunion, equifax, experian) disputinng the debts. Just ask that they "show proof or remove." If the creditor kept poor records, then they might delete the charge, or at least you're in a better bargaining position. (You might have to do this a couple times for it to be effective)

Then, choose to wait it out or pay them off. Making consistent payments is usually just as good or better than paying them off completely as far as credit scores go. It puts the account in good standing.
If you wait them out, then just make sure you don't incur any new bad debts for about 7 years. (caveat - if it's a big debt and you're trying to get a loan for something else, you should consider paying it all off because that will affect your dept to income ratio. But if you have some time, you should pay it off in a few payments rather than all at once. This is because consistent, smaller payments is what the creditor is looking for.)

Consumer credit counseling will help you buget and help pay off your debts, but you really shouldn't do that until you're close to bankruptcy becuse it WILL affect your credit.
Instead, take some money management classes or research on your own.

Most important thing to remember is your credit score is a reflection of how risky loaning money to you is. This is NOT the same thing as a determination of how good you are with money or how good of a person you are. Creditors look at your debt to income ratio and your history of paying off debts.

They don't care if you're wise about money and thus bought things in cash - because they can't make much money off you. Creditors earn their livings from interest, so that means they PREFER someone who makes the minimm payment every month for 5 years rather than the person who pays it all off in a year but missed one payment in March.

Also, pulling your credit report a lot doesn't impact the score. Trust me, the more often you see that damn thing, the better. It's almost always got some innaccuracy that you need to fix and the only way you can fix it is to see it.

Last note, there are a ton of myths and misinformation about credit. There are a lot of people who want your money and there are various routes they can take to get it. They will lie.